Solution:
Different between Capital and Revenue expenditures.
(1) Capital Expenditure:
Expenditure incurred for the acquisition of fixed assets which are retained in the business for the purpose of earning profit and not for resale such a land and building plant and machinery etc.
(2) Revenue Expenditure:
These are the expenditures incurred on the purchase of floating assets e.g for resale purpose such as cost of merchandise raw material used in producing the goods or the cost of goods purchased for resale.
So
Form the above two statement,
The Purchase of machinery Rs. 10,000,000 (is a Capital expenditure).
And
Rent of Office building Rs. 120,000 (is Revenue expenditure).
(b) Use of balance sheet and accurate profit and loss procedure
Gross profit = Income – cost of sales
Net profit = Gross profit – Expanses
Balance Sheet:
The accounting balance sheet is one of the major financial statements used by accountants and business owners. (The other major financial statements are the income statement, statement of cash flows, and statement) The balance sheet is also referred to as the statement of financial position.
The balance sheet presents a company's financial position at the end of a specified date. Some describe the balance sheet as a "snapshot" of the company's financial position at a point (a moment or an instant) in time. For example, the amounts reported on a balance sheet dated October, 2015reflect that instant when all the transactions through October , 2015have been recorded.
Because the balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies, and labour unions.
Income Statement:
The income statement is one of the major financial statements used by accountants and business owners. (The other major financial statements are the balance sheet, statement of cash flows, and the statement.) The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income. We will use income statement and profit and loss statement throughout this explanation.
The income statement is important because it shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary
Different between Capital and Revenue expenditures.
(1) Capital Expenditure:
Expenditure incurred for the acquisition of fixed assets which are retained in the business for the purpose of earning profit and not for resale such a land and building plant and machinery etc.
(2) Revenue Expenditure:
These are the expenditures incurred on the purchase of floating assets e.g for resale purpose such as cost of merchandise raw material used in producing the goods or the cost of goods purchased for resale.
So
Form the above two statement,
The Purchase of machinery Rs. 10,000,000 (is a Capital expenditure).
And
Rent of Office building Rs. 120,000 (is Revenue expenditure).
(b) Use of balance sheet and accurate profit and loss procedure
Gross profit = Income – cost of sales
Net profit = Gross profit – Expanses
Balance Sheet:
The accounting balance sheet is one of the major financial statements used by accountants and business owners. (The other major financial statements are the income statement, statement of cash flows, and statement) The balance sheet is also referred to as the statement of financial position.
The balance sheet presents a company's financial position at the end of a specified date. Some describe the balance sheet as a "snapshot" of the company's financial position at a point (a moment or an instant) in time. For example, the amounts reported on a balance sheet dated October, 2015reflect that instant when all the transactions through October , 2015have been recorded.
Because the balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies, and labour unions.
Income Statement:
The income statement is one of the major financial statements used by accountants and business owners. (The other major financial statements are the balance sheet, statement of cash flows, and the statement.) The income statement is sometimes referred to as the profit and loss statement (P&L), statement of operations, or statement of income. We will use income statement and profit and loss statement throughout this explanation.
The income statement is important because it shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary
No comments:
Post a Comment